The FTSE 100 Index closed 33.5 points lower at 5,776.7 today amid ongoing concerns over the global economic outlook.
Blue-chip defence giant BAE Systems was among the companies which closed in the red after merger talks with rival EADS were scrapped.
The two firms blamed government wrangling for the collapse of their £28billion merger, which would have created the world’s biggest defence and aerospace group. BAE shares fell 4.5p or 1% to 320.9p.
Banking stocks surged however, after it emerged that capital and liquidity rules have been relaxed in an effort to stimulate lending.
The Financial Services Authority has told banks that they will not be required to hold extra capital against loans used in the Bank of England’s “funding for lending” scheme.
Lloyds Banking Group was 4% higher, up 1.5p at 38.5p, and Royal Bank of Scotland cheered 5.4p to 262.7p.
Elsewhere, global growth fears continued to dictate the market’s performance, as silver miner Fresnillo became one of the biggest fallers in the top flight with a 47p decline to £19.26.
The biggest Footsie risers included United Utilities up 11.5p at 729p and Tate & Lyle ahead 5.5p at 688.5p.
The biggest Footsie fallers were ARM Holdings down 17p at 578.5p, Vedanta Resources off 30p at £10.60, Smith & Nephew down 17.5p at 655p and IMI off 23.5p at 920p.
Carrie Keenan, of investment manager and financial planning specialist Brewin Dolphin in Aberdeen, highlighted that STV Group added 0.54% at 92.5p.
Fallers included Parkmead Group, which lost 4% at 12p, Weir Group weakened 2.08% to £17.38 and Aberdeen Asset Management softened 1.38% to close at 321p.